POWER SYSTEM PRICING UNDER NON-CONVEXITY

Abstract

Deregulation of power industry has led to the development of wholesale electricity markets and has introduced competition. However, non-convexities are present in electricity markets that pose challenges in determining optimal market clearing prices. The conventional marginal prices do not fully recover the total production costs of the producers. Hence, additional payments have to be made. New methodologies have to be investigated to ensure that no market agent incurs a loss and incentives have to be provided to encourage the market agents to participate in the market. There are various pricing schemes reviewed in literature to determine prices, so that no producer has to incur a loss. In this thesis, two pricing schemes convex hull Pricing and Primal Dual method of pricing are discussed in detail. Dantzig Wolfe Algorithm is used which addresses the challenge of characterizing the convex hull. Primal Dual method generates uniform LMPs which recover start up costs. This thesis proposes the use of Primal Dual method to generate uniform LMPs which compensates lost opportunity costs of generators, without requiring separate uplifts. Examples are solved by all the methods providing an insight of their advantages, disadvantages, conflicting objectives and the implementation challenges.